Avoiding growth at all costs: Why we optimize lead quality before focusing on volume and cost
When B2B SaaS companies take investment – particularly VC – it’s hard for them to resist spending incremental amounts on PPC without a thought to the quality of the leads that they’re winning.
In fact, most B2B SaaS companies focus scaling paid media completely backwards and the result is bad leads, high spend and almost nothing to show for it.
The approach that we take with our client’s paid media is to focus on scaling quality before scaling volume and then optimizing the cost.
In this article, we look at:
- Common mistakes companies make when scaling campaigns
- Why lead quality is more important than quantity
- Our process for optimizing your campaigns
By the end, you’ll know how to create a simple, effective plan for optimizing your leads and getting the best results from your PPC campaigns.
Want to get more value from your PPC campaigns? Schedule a Free SaaS Scale Session for more guidance on how you can improve the quality of your leads.
Don’t just throw money at the problem
Money can’t solve every business problem, but for many companies that are under pressure to scale quickly throwing money becomes the default approach to speeding up growth.
We see this happen a lot with SaaS and tech companies, where pressure is piled on marketers to spend big with the expectation that this will translate directly into faster growth. This often happens shortly after the company has raised money from venture capitalists. The investors want to see their money in action, and they assume that more money spent equals more leads, and more leads equal more customers.
While this approach will occasionally prove to be effective, more often than not you’ll see a steep increase in cost per acquisition, as well as a steep decline in good fit leads.
Focus on long-term growth, not quick wins
It would be easy to blame this issue on internal pressures within each company, but the reality is that the SaaS industry is obsessed with growth and rapid scaling. It seems like half of the blog posts about SaaS marketing are about how quickly a company has grown or how you can grow your own business at a faster rate. In fact, if you go to Twitter and search for “MRR” (Monthly Recurring Revenue), you’ll see pages of Tweets from founders and marketers talking about either how much their product has already grown or how much they plan to grow over the next year.
This isn’t a surprise: Acquiring more paying customers is the entire point of running a business or working in marketing. But it’s created this mentality that growth should be sought as quickly as possible, which can lead to a culture of prioritizing short-term wins over steady growth.
Generating lots of cheap leads will give you great optics for the boardroom, but it won’t set you up for long-term success.
We encountered this recently with a client who came to us because they’d just received a healthy injection of funds. They wanted us to spend it for them by ramping up investment in a PPC campaign.
After looking at their situation, we didn’t feel like the campaign would be an effective use of their money, so we proposed a more measured, long-term approach to improving their leads. We put together a document outlining why we believed they would be wasting their money by just pumping more of it into existing campaigns, and we explained the steps we would take instead.
They fired us.
This short-term approach to their campaign will ultimately cost them money and leads in the future, which is why we’ve defined our process in the next section to help you to avoid making the same mistake.
A simple process to optimize your campaigns
Our approach to optimizing lead quality is made up of four steps that can be easily adopted and implemented. Go through these steps one at a time—and only move on to the next step once you have achieved your goal for the current step.
After you’ve gone through all four steps, start the cycle over again. This enables you to continue improving and getting the best value from your campaigns.
1. Focus on lead quality
As we’ve already discussed, gaining quality leads is by far the most important part of this process, which is why you should focus on getting this right first.
The biggest mistake companies make when trying to improve their lead quality is not having their buyer personas or qualifying criteria clearly defined. A lot of people rely on gut feel, which prevents them from being able to systematically improve and refine their lead quality.
To determine your ideal buyer persona, you should be constantly sorting your data into a list of qualified and non-qualified leads. Start by figuring out exactly what the qualification criteria is for your product or company.
For example, clicks that didn’t convert into demos or signups are largely bad clicks, but you want to treat them differently in your qualification criteria depending on whether they exited immediately or browsed around the site first.
Tip: Companies often disqualify non-corporate email addresses such as Gmail or Hotmail as junk leads, but many of us use a second account to trial software. If you automatically disqualify these from your criteria, you could be throwing away quality leads.
Every company and industry is different, but you’ll likely consider the following when defining your qualification criteria:
- Company size
- Buying behavior (whether they show up to demos, for example)
- Budget authority
- Whether they activated their account after signing up
Basically, you’re building a profile of not just who you want, but also who you don’t want. As an example, if your service is targeted at teams, you’ll want to disqualify solo users from your targeting.
Once you have these qualifying criteria defined, the next step is to sort through existing leads to create a list of qualified or non-qualified leads. A simple way of doing this is to use a binary system where a lead is either qualified or not—or if you want to use a more sophisticated approach, you can give each lead a score out of 100. Whichever you use, you want to establish a feedback loop where the non-qualified leads are excluded, and the qualified leads continue to be targeted.
Once this is done, you can then feed these lists back into your ad platforms by creating custom audiences. This will immediately improve the effectiveness of your advertising, because those on the non-qualified list will no longer be targeted and the qualified leads will be added to the target account list.
Tip: If you’re struggling to define these criteria, a simple method is to open up your CRM, look at customers from the last month, and then sort through them one by one, identifying what makes them a good or bad lead. This is even easier if you’re recording disqualification reasons in your CRM, because you can filter out all leads with the same criteria and add them to the non-qualified list.
2. Increase Lead Volume
Once your qualifying criteria are clearly defined, the next step is to increase your volume while using your qualifying criteria to maintain a high quality of leads.
This process is much like fishing with a large net. You can’t expect to pull in only the fish you’re seeking, but you can get a good idea of what percentage to expect. Not every lead will be perfect, but you can work out what percentage of your leads you can expect to be high quality. This will be your Goldilocks zone as you increase volume.
To determine how to increase your volume, you should look at your current campaigns and evaluate which is contributing the most SQLs. Then you can use any of these approaches to bump up the volume:
Invest more in the existing campaign
This will likely have limited results, but it can be an effective way to quickly increase your volume while maintaining a decent cost per lead. You’ll want to increase in small increments and keep a close eye on the cost per lead, because it could easily rocket if you scale up too quickly.
Remarket to existing qualified leads
This approach uses the data you gathered in the first step of the process and directly targets those you already know fit your qualifying criteria. This is a lower-risk approach because you know they already exist and are likely interested, but it may be a very limited pool of prospects.
By taking what you already know works in one geographic area and applying it to a similar market, you have an opportunity to increase your lead volume in a controlled way. For example, you might choose to target English-speaking countries, starting with the U.S. Once you’re at your ideal lead quality, you can then target Canada, then the U.K, Australia, and so on.
Tip: If you start in a bigger market such as the U.S., you’re more likely to find success when you move on to smaller similar markets, because the larger sample size will provide more accurate data.
3. Optimize lead cost per acquisition (CPA)
There is often too much emphasis on achieving the lowest possible cost per click (CPC), but we’ve found it’s much better to get the highest possible CPC with the highest conversion rate than the lowest CPC with the lowest conversion rate. After all, CPA is a much more effective measurement of your lead quality, which will provide much better results long term.
CPA is calculated by analyzing how many of the leads actually carried out the target action. For example, if you aimed to get a lot of people to a form, the number you should focus on is not how many people arrived at the form, but how many people filled it out.
Essentially, you’re focusing on optimizing the post-click experience, rather than spending too much time on the pre-click. That’s not to say the pre-click experience isn’t worth your time—it’s just not as important when trying to improve your acquisitions.
As with the previous step, there are a number of ways you can go about doing this:
- Filter out the rubbish – By this, we mean bad actor profiles such as bouncers, bots, or users who don’t engage with the site at all. You want to find a way to discover and omit these profiles from your campaigns. We’ve recently started using ClickCease (no partnership) to filter out bad traffic between the pre-click and post-click stages.
- Provide different lanes for different leads – Not all visitors to your site have the same intentions. One lead might already be set on signing up for your product, in which case you want to make sure they have a fast lane available to them such as a sign-up button on the page they land on. Other leads might just be discovering your SaaS, in which case you don’t want to rush them, so you should have a slow lane that allows them to learn about your product via things like blog posts or videos.
- Test ad copy – Testing variations of advertising copy is a tried-and-tested way to improve the effectiveness of a campaign, and it can be a great way to improve your CPA.
- Conversion rate optimization – By implementing CRO strategies on your landing pages and following CRO best practices, you can improve conversions and bring down your CPA.
Tip: The goal of this step is to remove friction from whatever journey your lead is on and to ensure they have the best chance of acting the way you want them to.
4. Increase Lead Velocity
The final step in this process is to focus on your best-performing campaigns and steadily increase your budgets at a compounding rate. To determine which campaigns are performing the best, find out which are driving the most SQLs to your site. Focus on those.
It can be daunting when you try to decide how quickly to ramp up, but you can simplify this by setting rules within your ad platforms so your chosen campaigns will automatically increase in velocity in a controlled way.
Here is an example of a rule you could configure:
If the CPA is in [this range] and conversions are higher than x, increase budget by 10% until it reaches a cap of y.
When the increases in velocity slow down or stop, that’s a good indicator that this cycle has done all it can and it’s time to start the whole process again.
Rinse and repeat
It’s easy to focus on trying to buy more clicks, but it’s more effective to focus on lead quality. Once you improve the quality of your leads, you can expand and scale your campaigns in a much more effective and manageable way.
These four steps provide a clear process that will save you money, improve your conversion rate, and expand your reach.
Once you’ve reached your desired goal for the campaign, just start again and continue reaping the rewards!
Schedule a Free SaaS Scale Session for further support and guidance in improving your lead quality and making more sales.